Management Accounting Report: Financial Analysis of Creams Limited

This report provides a comprehensive analysis of management accounting practices applied to Creams Limited, a medium-sized food and beverage company. It begins with an introduction to management accounting, differentiating it from financial accounting, and explores various systems like price optimization, cost accounting, and inventory management. The report then delves into the methods used for managing accounting reporting, including budgeting, accounts receivable, inventory, performance, and department reports. It highlights the benefits of adopting a management accounting system and the impact of integrating management reports with the accounting system. The core of the report focuses on revenue statements using managerial accounting techniques, such as marginal and absorption costing, along with a detailed analysis of financial data. Furthermore, it examines the benefits and drawbacks of managerial planning tools, emphasizing their importance in budgeting and forecasting. The report concludes by studying how managerial accounting tools can be applied to solve financial problems, offering insights into how these tools can lead organizations to sustainable success and evaluating how planning tools help overcome financial challenges. The report uses examples and calculations to demonstrate how the concepts are applied.

Management Accounting

Contents
Contents...........................................................................................................................................3
INTRODUCTION...........................................................................................................................4
TASK 1............................................................................................................................................4
P1 Understanding of Management accounting system................................................................4
P2 Methods used for managing accounting reporting.................................................................6
M1 Benefits of adopting management accounting system..........................................................7
D1 Impact of integration of management report and accounting system..................................8
TASK 2............................................................................................................................................8
P3 Revenue statement applying managerial accounting techniques...........................................8
D2 Analysis of data by financial report.....................................................................................12
TASK 3..........................................................................................................................................12
P4 understanding of benefit and drawbacks of managerial planning tools...............................12
M3 Importance of planning tools for budgeting and forecasting process.................................14
TASK 4..........................................................................................................................................15
P5 detail study of how managerial accounting tool apply to solve financial problem..............15
M4 Interpretation of how, in responding to financial problems, management accounting can
lead organizations to sustainable success..................................................................................16
D3 Evaluation of how planning tools for accounting to overcome financial problems to lead
organizations to success.............................................................................................................16
CONCLUSION..............................................................................................................................17
REFRENCES.................................................................................................................................18

INTRODUCTION
Management accounting the word is a combination of 2 different elements of business,
management is a process of influencing workforce to done their work in order to achieve goal of
organization on the other hand accounting is a process of presenting accounting data in effective
way, thus management accounting refers as a systematic framework which provides accounting
information in an effective which help in formulating polices, planning, and controlling
operational activities of organization (Cescon, Costantini and Grassetti, 2019). This report is
prepared for solving issues of Creams Limited, it is medium size organization which provides
foods and beverage items to their customers. In this report uses of cost, price job accounting
system for formulating of policies, various report use for performance evolution has been
describe. This report also included technique which helps in reorganization of profits and tools
used for identification of reason of financial problems and ways through which organization can
overcome this problem has been defined clearly.
TASK 1
P1 Understanding of Management accounting system.
Management accounting is a framework which helps in representing accounting data in
order to formulate strategic plans for attaining future goals of business organization (Agustia,
Sawarjuwono and Dianawati, 2019).
Financial Accounting: It is a branch of accounting which is related with recording,
summarizing and communicating only financial transactions (Weygandt, Kimmel and Kieso,
2019).
Difference between management accounting and financial accounting
Management Accounting Financial Accounting
It provides information for internal parties It provides information for external parties
It is futuristic In this accounting historical data a use for
interpretation
It measure financial and operation
performance
It measure only financial information.

For formulation of various strategies manager needs to use some specific system of this
branch of accounting, these are described below:
 Price Optimising System: This system is used to define various types of pricing
strategies an organization can use for selling their products. Manager will take
decision regarding their product prices on the basis of their organizations needs and
the cost incurred during the whole process of converting raw material into final
product. Organization can use price retraction, price skimming, and cost of pricing,
discounting strategies of price they decide it on the basis of scanning their
competitor industries, external factors and future objective of organization. It also
depends on the product life cycle as well as industrial life cycle of the organization.
The main requirement of this system is to ascertain behavioural change among
consumers due to performing the act of price change. This help to attract new
potential consumers.
 Cost Accounting system: It is a framework which provides various types of
technique though which organization can easily evaluate cost incurring during their
production process by the uses of this system manager can evaluate activities which
incurred high rate of expenses (Hasyim and Jabid, 2019). Job costing, process
costing, marginal and standard costing are part of this system. Business
organization applies system of cost on their basis of their size, external as well as
internal factors of the organization. Process costing is used for mostly
manufacturing units, marginal and standard costing can be adopted by any type of
organization theses technique help in determining of profits as well as risk factor of
the enterprises. The main requirement of this system is to ascertain costing
associated with production of each unit so further actions can be taken to minimise
expenses and costings.
 Inventory Management System: Inventory is most essential part of every
organization success of an enterprise depends on how effectively their manager use
and maintain stock in effective way (Swafford and Costello, RTC Ind Inc, 2019).
For this purpose, inventory management system has to been developed through
which organization can plan, manage and control stock. By the uses of EOQ, LIFO,
FIFO, method managers calculate maximum, minimum, and dangers level of

inventories these methods use for proper managing of stock item of organization.
With the implementation of ABC, JIT analysis technique managers can maintain
records of all the elements of stock, it will help in controlling cost and wastage of
inventories within the workplace. This system has main requirement related to
effective management of inventory so able to complete the actions properly on
time.
P2 Methods used for managing accounting reporting
Managerial accounting reports are prepared by manager in order to collect essential
information data for formulating future polices will help in decision making process (Carini,
Giacomini and Teodori, 2019). Following are the reports manager of Creams limited will be
used:
 Budgeting report: This report defines the overall summery of various types of
budget made by managers it includes, production, purchase, manufacturing and
master budget for the organization, it includes main essential elements of all the
budgets, for example this report provide brief summary of total revenue,
expenditure, cost of manufacturing products, total items of purchasing of raw
material, selling units etc. With the use of this report manager can analysis their
organization performance and it will help in risk management also
 Account receivable report: This report is very necessary for organization in order
to maintain their position and increase cash inflow, manager of Cream limited will
use account receivable report for take record regarding their receivable account,
this report is used for formulating and managing debtor policy of the organization
(Ajanaku and Ekundayo, 2019). It will provide information related to number of
default debtor, available in present time period, amount of cash has so been taken
from debtor’s reason of delay in payment by potential debtors and also number of
non-performing assets within the organization. By using all the relevant
information manager of Creams limited may prepared rigid polices for their
account receivable they can sue case or charge penalties for late payment of their
selling product. This report also used to identify main target market customer
which is faithful to the organization.

 Inventory report: This report is formulated on the basis of data collected from
various inventory management techniques it is used ABC, JIT and records of
inventory document for formation of inventory report. Manager of Creams limited
must be used this report for providing a report which define detail summery of
stock calculation, verification process of inventory cycle and methods use of
measuring of stock value and managing stock has been describe briefly it will help
in analysing performance of company and build effective policy of inventory
regarding future.
 Performance report: This report is used for evaluation of performance and help
identification of each employee performance on the basis of their work.
Performance report is parodied summery related to the work performance of
departments as well as their well employees (Douriez, Messmerand Raffin, 2019).
It will help in taken decision regarding bonus or promotion or provide prestigious
benefits to their skilled employees. It will help in enhancing motivation of
workforce also this report is useful for decision making regarding divide
distribution. Manager of Creams limited will use this technique for analysing
performance and taken decision regarding distribution of profits.
 Department report: This report has been formulated to record all the essential
information regarding each department of organization. M manager of Creams
limited formulated this reports it will help them to identify performance of each
department, and also it is beneficial for supervision of all activities of department.
This report helps them to analysis whatever all department work with coordination
or not breaching any ethics and law of constitution.
M1 Benefits of adopting management accounting system
Management accounting system includes cost, price job, inventory account system which
will uses for providing relevant information as well as they are helpful in control cost, managing
all activities and provide guideline for future activities (Calza, Goedhuys and Trifković, 2019).
Manager of Cream limited use all these method and tools of management accounting for gain
profits.

D1 Impact of integration of management report and accounting system
This is very essential for the manager of Creams limited to integrate report ad system of
manager accountant only then they can formulate policies and work in an effective manner by
using information of accounting system reports are prepared which provides direction to
formulate strategies this interaction of management reporting and management accounting
system are essential for achieve goal of the organization (Aureli, Del Baldo and Lombardi,
2019).
TASK 2
P3 Revenue statement applying managerial accounting techniques
Marginal costing: This is also known as variable costing in this method for calculation
of profit only arrival cost has been considering and it will help in identifying break even,
marginal safety point for the organization (Nathwani, 2020).
Interpretation: This calculation states that if manager use marginal costing technique
then they will gain 50000 gross profits in the month of January as well as February
Absorption costing: This tool of costing is used for determining cost and profit by sing
direct and indirect factor of organization (Nan, 2019).
Income Statement of Creams limited (Absorption costing)

Interpretation: By this calculation it has been identified that organization attain 4700
and 16100 net profit when they apply absorption method
Standard cost: This cost is used to identify difference between actual cost and standard
cost of the organization .it wills useful for controlling cost by formulating effective polices. In
this method various variance related to production factor has been collocated
Material Variance
 Material Cost Variance= Standard material cost – Actual material cost
 Standard quantity * Standard Price – Actual quantity – Actual Price
Material Price Variance:
Particular Formula Amount
Material Price Variance Actual Quantity (SP-
AP)
1100 (F)
Material Usage Variance
Particular Formula Amount
Material Usage Variance Standard Price (SQ-AQ) 2000 (A)

Material cost variance
Particular Formula Amount
Material cost variance Standard material cost –
Actual material cost
900(A)
Labour Variance:
Labour Efficiency Variance
Particular Formula Amount
Labour Efficiency Variance (SH-AH) *Standard rate. 500 (A)
Labour rate variance
Particular Formula Amount
Labour rate variance Actual time (SR-AR) 680 (A)
Labour cost variance
Particular Formula Amount
Labour cost variance  Standard cost –
Actual cost
1180 (A)

D2 Analysis of data by financial report
Financial report represents income and expenditure of organization for given time period.
Manager of Creams limited can be used marginal as well as absorption costing income statement
for identifying profit volume and relationship of profit with the factor effect it.
TASK 3
P4 understanding of benefit and drawbacks of managerial planning tools
Planning tools: Theses tools are used for planning and controlling of business activities
in order to sufficiently run business transactions (Giriago, 2019). Following planning tools can
be used by manager of Creams limited:
Budgetary control technique: Budget is a framework which provides information of
future cash inflow or cash out flow activity. It provides revenue and expenditure amount in
future

Zero Base Budgets: Theses budgets are prepared on the basis of deep research of
external and internal factors affecting the organization, it collects data from initial level thus it is
called zero bade budget, which is starting from scratch level (Ibrahim, 2019). Following are the
advantage and disadvantage of adopting this method for preparation of budget:
Advantages
 Zero based budget help in provide relevant and accurate information regarding future.
Manager of Creams limited use it budgetary control because help to get reliable
information.
 This method is helpful in utilization of resources through which possible to build reliable
accounts
Disadvantage
 Having deep research take time as it started from zero level.
 It requires to hire skilled and experience researcher for formulating budget.
Rolling Budget: This type of budget in formulated for short time period, less than one
year it. Rolling budget is techniques of budgeting in which budgets are prepared on continuous
basis when period of a budget competes then another budget is formulated on the basis of data
collected from previous budget to remove errors of previous budget.
Advantages
 Rolling budget help in enhancing efficiency of organization as aid in getting of regular
amount of information.
 Manager of Creams limited it will improve productivity of the organization and aid in in
performance of regular functioning.
 Disadvantage
 Employees get frustrated due to changes of policies and more flexibility in work force.
 It is time consuming process.
Activity Base Budget: This type of budgeting technique includes making budget on the
basis of allocation of cost of each activity of the organization (Pagare, 2020).
Advantages